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Consultant: The Overcapitalized Developer Overcomes

SEATTLE, WA-The tendency to undercapitalize is the playfield of hard-money lenders who rake in high interest rates from developers under pressure, says a local independent development consultant.

By Janet Parker | Updated on February 04, 2002

SEATTLE, WA-Paul Konrady has seen more than his fair share of developers “lose it all.” There are many ways to do it, says the development consultant, but ultimately it comes down to money.

Generally speaking, the tendency for developers is to undercapitalize and, for some lenders, to capitalize on those who do, says Konrady, whose clients include companies like Quadrant and Stafford Homes. There are honest lenders and there are also those who rake in high interest rates from developers under pressure.

The situation usually begins when “a developer needs what they believe is short-term money to pay for some aspect of the development approval,” says Konrady. Unscrupulous lenders may bait the developer into borrowing “just enough … to hang themselves,” which is to say, not enough to handle anything that might happen.

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